TN recoups $15.3M of bilked jobless aid

May 23, 2013

Written by

The Tennessean

The state Department of Labor says it has recovered $15.3 million in fraudulently paid unemployment benefits this year by garnishing the federal tax returns of workers.

The department began using the Treasury Offset Program in July to recover the fraudulent unemployment benefits, according to spokesman Jeff Hentschel.

The Labor Department was scorched by an audit this year that showed the state had accrued $73 million in unemployment benefit overpayments and payments due to possible fraud. The audit was especially critical of the department’s methods for recouping fraudulent benefits.

“The ability to reclaim these funds that were fraudulently collected is extremely important to the business community because the health of the Unemployment Trust Fund affects the amount of taxes an employer pays,” said Acting Labor Commissioner Burns Phillips.

A significant amount of the overpayments results from workers receiving benefits after they return to work and before they or their employers notify the state that they are working again, state officials said.

The state now has an online system in which employers can report the hiring of workers, so the benefits can be stopped sooner, Hentschel said. In the past, the state might not have learned that someone had returned to work until weeks or months later, when the employer filed a quarterly tax return that included workers’ earnings and Social Security numbers.

The Treasury Offset Program garnishes IRS refunds as well as federal salaries including military pay, federal retirement, contractor payments, other federal benefits such as Social Security and some federal payments from certain loans that are not exempt.

In a prepared statement, Phillips said the program was really addressing the symptom instead of the cause of fraud and overpayments, which he said would be a focus for the Labor Department moving forward.

“Developing strategies to prevent fraud is of the greatest importance. In the coming months we will share these new measures with the public as they are hammered out.”